Jerome Powell, the Chairman of the Federal Reserve, delivered a speech at the annual conference in Wyoming (Jackson Hole), during which he confirmed that the central bank would not hesitate to take preemptive steps if the tight labor market posed a threat to price stability. However, he also emphasized that merely exceeding employment rates beyond theoretical estimates of maximum capacity does not necessarily mean a direct shift towards tightening monetary policy.
Following the speech, the CME FedWatch tool showed a jump in the expectations for an interest rate cut in September, with the likelihood of a 25 basis points cut rising to about 89.2%, while the chances of maintaining the current levels dropped to approximately 10.8%. For October, the expectations were split between a 25 basis points cut at 49% and a 50 basis points cut at 45.8%, with the possibility of holding steady at only 5.3%.
The impact was not limited to interest rate markets, as it quickly reflected on digital currencies. According to Coingecko data, the price of Bitcoin jumped by 1.6% within one hour to reach about $116,798, while Ethereum also saw a similar rise to around $4,655.
Based on these movements, it seems that the markets have already absorbed the scenario of two additional interest rate cuts this year, reinforcing traders' conviction that the path of monetary policy is clearly heading towards easing.
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